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Can Prabowo’s Red and White Cabinet Resolve the Moratorium Debate in Bali?

Can Prabowo’s Red and White Cabinet Resolve the Moratorium Debate in Bali?
Can Prabowo’s Red and White Cabinet Resolve the Moratorium Debate in Bali?

Newly elected President Prabowo Subianto’s administration, known as the “Red and White Cabinet”, is the largest since 1966 when Indonesia’s first ever president, Sukarno came to power, and is expected to make strides in strengthening regulatory enforcement and infrastructure improvements across the country with new goals and ambitious targets for economic expansion and environmental stewardship.

Newsweek reports that the size of  Subianto’s cabinet is a political strategy to build a durable, united administration, quoting the President as saying, I want to create a strong government that would unite our multicultural society and diverse political interests. It is worth noting here that there are concerns over the efficiency of such a large cabinet. Newsweek says that critics worry it could slow down decision-making and lead to inefficiencies.

That said, Subianto’s policies look to encourage economic growth to 8% by the end of his first five-year term while promoting sustainability, which might address issues arising from the influx of short-term digital nomads as well as long-term investors. By fostering regulated investment options, the administration is in a position to reduce the reliance on unqualified developers who are often linked to some of Bali’s worst examples of environmental mishandling. Some observers feel this could also support a push toward standardised building practices and a revaluation of land leases, aligning with the President’s broader economic and environmental goals​.

Let’s look at some of these issues and how the “Red and White Cabinet” might address them.

A New Cabinet – New Policies?

The new cabinet does carry with it the promise to significantly impact Bali’s real estate, tourism, and environmental landscape. The administration’s emphasis on improving land-use regulations, for example, guided by Nusron Wahid at the Ministry of Agrarian Affairs and Spatial Planning, signals a potential tightening around development permits. This could include better enforcement of the spatial zoning (RTRW) rules, which are often evaded in Bali due to a lack of clear oversight, poor coordination, and, to some degree, the corruption often associated with developer influence.​​

The re-appointment of Finance Minister Sri Mulyani Indrawati is significant in that her continued role in overseeing tax reform and fiscal policy offers the potential for stricter tax enforcement on property investments, including the possible revision of tax benefits under the PMA structure, which foreign investors often exploit. If implemented effectively, these reforms could improve government revenue from Bali’s booming real estate market and curb tax avoidance, adding a new layer of fiscal accountability to foreign-led developments.​

A More Even Economic Spread

The administration’s agenda also includes boosting tourism infrastructure across the country, which would support alternative destinations to Bali and reduce the overconcentration of visitors on the island. By developing other regions, Subianto’s team has the opportunity to provide viable alternatives for tourists as well as investors, promoting a more even economic spread. This decentralisation has the potential to relieve Bali from some of its tourism pressures that have added fuel to the fire around the recent moratorium debate, allowing the island to focus on quality more than quantity, a more sustainable tourism culture, and the preservation of the island’s unique heritage.

We have to wait and see how and when the “Red and White Cabinet” rolls out these policies, but the development landscape in Bali may gradually shift towards a more regulated and sustainable model, potentially bypassing the need for a strict moratorium by addressing the core issues — environmental degradation, land misuse, and regulatory lapses — through more targeted government intervention.

Balancing Growth and Preservation

While previous moratorium attempts in Badung (2011) and Denpasar (2018) aimed to limit the rapid growth of tourist accommodations and ease environmental strain, they had limited success. Developers quickly shifted their focus to other regencies, such as Gianyar and Tabanan, circumventing local restrictions. This response underscores the need for broader, more effective solutions to protect Bali’s environmental and cultural heritage; issues that hopefully Subianto’s administration will confront with a renewed focus on regulatory enforcement, process efficiency, and corruption.

Reinforcing Zoning Regulations and Environmental Impacts

Spatial zoning regulations, such as the RTRW plan, designate specific areas for tourism, agriculture, and residential use. Although well-defined, enforcement in Bali has been lax, allowing for unauthorised developments that lead to overcrowding and environmental degradation. Most observers would agree that stronger zoning enforcement would prevent developers from misusing tourism-designated areas or encroaching upon green belts and agricultural lands. This strategy aligns well with the administration’s broader environmental policies, aiming to ensure that Bali’s development respects both natural and cultural boundaries​.

Bali’s tourism and property markets have rebounded post-COVID, and we are seeing denser developments on smaller plots of land, especially popular in areas like Seminyak and Canggu. This trend, though very profitable for investors, strains water resources, increases pollution, contributes to overcrowding in local communities, and creates traffic jams to rival those in Jakarta. On a positive note, the environmental policies hinted at in Subianto’s platform suggest that his administration will address these pressing issues through stricter oversight on building density and sustainability standards. Moreover, by reinforcing public oversight of construction quality, the administration could mitigate some of the ecological damage caused by these developments, ensuring that they align with both local regulations and community standards​.

Economic Growth Goals vs. Environmental Sustainability

Subianto’s drive for economic expansion presents both opportunities and risks for Bali’s development dilemma. On one hand, the administration’s plans to diversify tourism and investment across other regions in Indonesia allow Bali to focus on sustainable tourism initiatives. On the other hand, this ambitious growth target could lead to heightened development pressures if not balanced carefully with environmental considerations. Finance Minister Sri Mulyani Indrawati’s expertise in fiscal policy reform and regulatory compliance is likely to play a pivotal role here. Her continued oversight could introduce fiscal mechanisms, such as environmental taxes or development fees, that balance economic incentives with sustainable practices, ultimately aiding Bali in managing its development pace without sacrificing economic vitality.

Foreign Investment and Unqualified Developers

The rise of foreign-owned properties in Bali, particularly through PMA (foreign investment) structures, has fueled concerns over regulatory loopholes and environmental neglect. Subianto’s administration, by focusing on maintaining national resilience and economic integrity, could implement more stringent controls on PMA structures. By closing gaps in tax compliance and ownership regulations, the administration is in a position to reduce the appeal of unregulated investments that often lead to poorly planned, unsustainable developments. This would also help tackle the issue of unqualified developers bypassing essential permits, as more stringent financial reporting and tax compliance could discourage these practices​.

Reshaping Bali’s Property Market

Another factor in Bali’s ongoing moratorium debate is the shift towards leasehold ownership structures like Hak Sewa (lease rights), which are often used for long-term arrangements not originally intended under Indonesian law. This leasehold trend, while popular among foreign investors, raises serious concerns about long-term sustainability and legal compliance. Subianto’s administration could address this by actively promoting more regulated lease options, such as Hak Guna Bangunan (HGB) or Hak Pakai, which require approval from the National Land Agency (BPN) and align better with Bali’s zoning regulations. Encouraging these legal structures over makeshift leases could lead to a more transparent property market, benefiting both local and foreign stakeholders.​

Infrastructure and Public Service Strain: A Focus on Bureaucratic Efficiency

One of the Subianto’s administration’s stated goals is to improve bureaucratic efficiency, especially within the public works and housing sectors. In Bali, local agencies like the Public Works and Housing (PUPR), the National Land Agency (BPN), and tax offices are frequently overwhelmed by the sheer volume of development applications, leading to delays and loopholes that developers and unscrupulous bureaucrats have exploited. By enhancing coordination between these departments, the administration can streamline processes like building permits (PBG) and activation permits (SLF). With Interior Minister Tito Karnavian and Public Works Minister Dody Hanggodo on the team, the cabinet is well-placed to introduce digital systems to monitor compliance and enforce regulations, reducing the likelihood of permit irregularities and environmental infringements.​

The Role of Alternative Tourism and Economic Diversification

By investing in tourism infrastructure across other islands, Subianto’s administration can provide tourists with diverse experiences. Minister of Tourism Widiyanti Putri, who leads a re-defined ministry, is charged with driving this effort and is well-placed to prioritise sustainable tourism projects that promote cultural heritage and ecological preservation, helping Bali shift towards quality over quantity in its tourism sector​.

While Subianto’s administration may not explicitly impose a building moratorium in Bali, the emphasis on regulatory enforcement and sustainable development does address concerns that have made the moratorium debate necessary in the first place as well as align with the essence of such a restriction, promoting a more balanced approach to Bali’s development problems.

As Subianto’s policies unfold, it remains to be seen whether this larger cabinet can streamline the implementation of these initiatives to address Bali’s development challenges effectively. Let’s hope that through stricter regulatory enforcement, infrastructure improvements, sustainable growth initiatives, and a clampdown on corruption at all levels of the process, the “Red and White Cabinet” can strike a balance that preserves Bali’s natural beauty and cultural integrity while supporting its economic vitality.

If you’d like more information on this topic as well as real estate and investment advice in Bali and beyond, please reach out to Seven Stones Indonesia via hello@sevenstonesindonesia.com. We are more than happy to share our insights to ensure your investments not only comply with the latest rules and regulations but also reap their rewards.

Sources: Channel News Asia, Politico, Newsweek, Jakarta Globe, ANTARA News, Seven Stones Indonesia

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